HR 567
112th CONGRESS
1st Session
H. R. 567
To amend the Internal Revenue Code of 1986 to provide for reporting
and disclosure by State and local public employee retirement pension plans.
IN THE HOUSE OF REPRESENTATIVES
February 9, 2011
Mr. NUNES (for himself, Mr. RYAN of Wisconsin, Mr. ISSA, Mr. SMITH of Texas,
Mr. HERGER, Mr. BRADY of Texas, Mr. LEE of New York, Mr. GARRETT, Mr. CALVERT,
Mr. MCCLINTOCK, Mr. CHAFFETZ, Mr. RIBBLE, Mr. FLORES, Mr. MCHENRY, Mr. MACK,
Mr. GOSAR, Mr. LABRADOR, Mr. ROSS of Florida, Mr. SENSENBRENNER, Mrs. MCMORRIS
RODGERS, Mrs. MYRICK, Mr. DUNCAN of South Carolina, Mr. ROHRABACHER, Mr. GALLEGLY,
Mr. MCCOTTER, Mr. JONES, Mr. COBLE, Mr. SCALISE, Mr. BARTLETT, Mr. MCKINLEY,
Mr. ROONEY, Mr. POSEY, Mr. DUNCAN of Tennessee, Mrs. BLACKBURN, Mr. NUGENT,
Mr. COFFMAN of Colorado, Mr. LAMBORN, Mrs. BACHMANN, and Mr. WESTMORELAND)
introduced the following bill; which was referred to the Committee on Ways
and Means
A BILL
To amend the Internal Revenue Code of 1986 to provide for reporting
and disclosure by State and local public employee retirement pension plans.
Be it enacted by the Senate and House of Representatives of the United
States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the `Public Employee Pension Transparency Act'.
SEC. 2. FINDINGS.
The Congress finds the following:
(1) Pursuant to clauses 1 and 3 of section 8 of article I of the Constitution
of the United States, the Congress has the authority to condition the continuation
of certain specified Federal tax benefits upon State or local government
employee pension benefit plans provision of meaningful disclosure under
section 4980J of the Internal Revenue Code of 1986, as added by this Act.
(2) State or local government employee pension benefit plans have promised
pension benefits to approximately 20 million Americans who are active employees
of these entities. An additional 7 million retirees and their dependents
currently receive benefits from State or local government employee pension
benefit plans. The interests of participants in many of such plans are in
the nature of property rights under State law.
(3) State or local government employee pension benefit plans are substantially
facilitated by the favorable tax treatment of participants and beneficiaries,
investment earnings, and employee contributions with respect to such plans
provided by the Federal Government under the Internal Revenue Code of 1986.
(4) The investment of State or local government employee pension benefit
plan assets, the distribution of benefits under such plans, and other related
financial activities are facilitated through the use of instrumentalities
of, and substantially affect, interstate commerce. These activities, which
are interstate in nature and have a substantial impact on the national economy,
affect capital formation, regional growth and decline, the national markets
for insurance, and the markets for securities and the trading of securities
of State and local governments.
(5) The financial status of State or local government employee pension benefit
plans also has a direct impact on the national markets for insurance and
trading of securities of State and local governments.
(6) State or local government employee pension benefit plans additionally
have a substantial impact on interstate commerce as a consequence of the
interstate movement of participants.
(7) State or local government employee pension benefit plans are becoming
a large financial burden on certain State and local governments and have
already resulted in tax increases and the reduction of services.
(8) In fact, a recent study published in the Journal of Economic Perspectives
found that the present value of the already-promised pension liabilities
of the 50 States amount to $5.17 trillion and that these pension plans are
unfunded by $3.23 trillion. Another study determined that the total unfunded
liability for all municipal plans in the United States is $574 billion.
(9) Some economists and observers have stated that the extent to which State
or local government employee pension benefit plans are underfunded is obscured
by governmental accounting rules and practices, particularly as they relate
to the valuation of plan assets and liabilities. This results in a misstatement
of the value of plan assets and an understatement of plan liabilities, a
situation that poses a significant threat to the soundness of State and
local budgets.
(10) There currently is a lack of meaningful disclosure regarding the value
of State or local government employee pension benefit plan assets and liabilities.
This lack of meaningful disclosure poses a direct and serious threat to
the financial stability of such plans and their sponsoring governments,
impairs the ability of State and local government taxpayers and officials
to understand the financial obligations of their government, and reduces
the likelihood that State and local government processes will be effective
in assuring the prudent management of their plans. The status quo also constitutes
a serious threat to the future economic health of the Nation and places
an undue burden upon State and local government taxpayers, who will be called
upon to fully fund existing, and future, pension promises.
(11) State or local government employee pension benefit plans are affected
with a national public interest and meaningful disclosure of the value of
their assets and liabilities is necessary and desirable in order to adequately
protect plan participants and their beneficiaries and the general public.
Meaningful disclosure would also further efforts to provide for the general
welfare and the free flow of commerce.
SEC. 3. REPORTING OF INFORMATION WITH RESPECT TO STATE OR LOCAL GOVERNMENT
EMPLOYEE PENSION BENEFIT PLANS TREATED AS A TAX EXEMPTION, ETC., REQUIREMENT
FOR STATE AND LOCAL BONDS.
(a) In General- Subpart B of part IV of subchapter B of chapter 1 of the Internal
Revenue Code of 1986 (relating to requirements applicable to all State and
local bonds) is amended by adding at the end the following new section:
`SEC. 149A. REPORTING WITH RESPECT TO STATE OR LOCAL GOVERNMENT EMPLOYEE
PENSION BENEFIT PLANS.
`(a) In General- In the case of a failure to satisfy any requirement of subsection
(a) or (b) of section 4980J (relating to failure of State or local government
employee pension benefit plans to meet reporting requirements) with respect
to any plan maintained with respect to employees of one or more States or
political subdivisions of one or more States, no specified Federal tax benefit
shall be allowed or made with respect to any specified bond issued by any
such State or political subdivision (or by any bonding authority acting on
behalf, or for the benefit, of such State or political subdivision) during
the noncompliance period.
`(b) Noncompliance Period- For purposes of this section, the term `noncompliance
period' means, with respect to any State or political subdivision in connection
with any failure, the period beginning on the date that the Secretary notifies
such State or political subdivision of such failure and ending on the date
that such failure is cured (as determined by the Secretary).
`(c) Specified Bond- For purposes of this section, the term `specified bond'
means--
`(1) any State or local bond within the meaning of section 103,
`(2) any qualified tax credit bond within the meaning of section 54A, and
`(3) any build America bond within the meaning of section 54AA.
`(d) Specified Federal Tax Benefit- For purposes of this section, the term
`specified Federal tax benefit' means--
`(1) any exemption from gross income allowed under section 103 (relating
to interest on State and local bonds),
`(2) any credit allowed under section 54A (relating to credit to holders
of qualified tax credit bonds),
`(3) any credit allowed under section 54AA (relating to build America bonds),
and
`(4) any credit or payment allowed or made under section 6431 (relating
to credit for qualified bonds allowed to issuer).'.
(b) Reporting Requirements- Chapter 43 of such Code is amended by adding at
the end the following new section:
`SEC. 4980J. FAILURE OF STATE OR LOCAL GOVERNMENT EMPLOYEE PENSION BENEFIT
PLANS TO MEET REPORTING REQUIREMENTS.
`(a) Annual Report- For purposes of section 149A, the requirements of this
subsection are as follows:
`(1) IN GENERAL- The plan sponsor of a State or local government employee
pension benefit plan shall file with the Secretary, in such form and manner
as shall be prescribed by the Secretary, a report for each plan year beginning
on or after January 1, 2011, setting forth the following information with
respect to the plan, as determined by the plan sponsor as of the end of
such plan year:
`(A) A schedule of funding status, which shall include a statement as
to the current liability of the plan, the amount of plan assets available
to meet that liability, the amount of the net unfunded liability (if any),
and the funding percentage of the plan.
`(B) A schedule of contributions by the plan sponsor for the plan year,
indicating which are or are not taken into account under subparagraph
(A).
`(C) Alternative projections which shall be specified in regulations of
the Secretary for each of the next 20 plan years following the plan year
relating to the amount of annual contributions, the fair market value
of plan assets, current liability, the funding percentage, and such other
matters as the Secretary may specify in such regulations, together with
a statement of the assumptions and methods used in connection with such
projections, including assumptions related to funding policy, plan changes,
future workforce projections, future investment returns, and such other
matters as the Secretary may specify in such regulations. The Secretary
shall specify in such regulations the projection assumptions and methods
to be used as necessary to achieve comparability across plans.
`(D) A statement of the actuarial assumptions used for the plan year,
including the rate of return on investment of plan assets and assumptions
as to such other matters as the Secretary may prescribe by regulation.
`(E) A statement of the number of participants who are each of the following--
`(i) those who are retired or separated from service and are receiving
benefits,
`(ii) those who are retired or separated and are entitled to future
benefits, and
`(iii) those who are active under the plan.
`(F) A statement of the plan's investment returns, including the rate
of return, for the plan year and the 5 preceding plan years.
`(G) A statement of the degree to which, and manner in which, the plan
sponsor expects to eliminate any unfunded current liability that may exist
for the plan year and the extent to which the plan sponsor has followed
the plan's funding policy for each of the preceding 5 plan years. The
Secretary shall prescribe by regulation the specific criteria to be used
for meeting the requirements of this paragraph.
`(H) A statement of the amount of pension obligation bonds outstanding.
`(2) TIMING OF REPORT- The plan sponsor of a State or local government employee
pension benefit plan shall make the filing required under paragraph (1)
for each plan year not later than 210 days after the end of such plan year
(or within such time as may be required by regulations prescribed by the
Secretary in order to reduce duplicative filing).
`(b) Additional Reporting Requirements- For purposes of section 149A, the
requirements of this subsection are as follows:
`(1) SUPPLEMENTARY REPORTS- In any case in which, in determining the information
filed in the annual report for a plan year under subsection (a)--
`(A) the value of plan assets is determined using a standard other than
fair market value, or
`(B) the interest rate or rates used to determine the value of liabilities
or as the discount value for liabilities are not the interest rates described
in paragraph (3),
the plan sponsor shall include in the annual report filed for such plan
year pursuant to subsection (a) the supplementary report for such plan year
described in paragraph (2) of this subsection.
`(2) USE OF PRESCRIBED VALUATION METHOD AND INTEREST RATES- A supplementary
report for a plan year filed for a plan year pursuant to this subsection
shall include the information specified as required in the annual report
under subparagraphs (A), (C), (F), and (G) of subsection (a)(1), determined
as of the end of such plan year by valuing plan assets at fair market value
and by using the interest rates described in paragraph (3) to value liabilities
and as the discount value for liabilities.
`(3) INTEREST RATES BASED ON U.S. TREASURY OBLIGATION YIELD CURVE RATE-
`(A) IN GENERAL- The interest rates described in this subsection are--
`(i) in the case of benefits reasonably determined to be payable during
the 5-year period beginning on the first day of the plan year, the first
segment rate with respect to the applicable month,
`(ii) in the case of benefits reasonably determined to be payable during
the 15-year period beginning at the end of the period described in subparagraph
(A), the second segment rate with respect to the applicable month, and
`(iii) in the case of benefits reasonably determined to be payable after
the period described in clause (ii), the third segment rate with respect
to the applicable month.
`(B) SEGMENT RATES- For purposes of this paragraph--
`(i) FIRST SEGMENT RATE- The term `first segment rate' means, with respect
to any month, the single rate of interest which shall be determined
by the Secretary for such month on the basis of the U.S. Treasury obligation
yield curve for such month, taking into account only that portion of
such yield curve which is based on obligations maturing during the 5-year
period commencing with such month.
`(ii) SECOND SEGMENT RATE- The term `second segment rate' means, with
respect to any month, the single rate of interest which shall be determined
by the Secretary for such month on the basis of the U.S. Treasury obligation
yield curve for such month, taking into account only that portion of
such yield curve which is based on obligations maturing during the 15-year
period beginning at the end of the period described in clause (i).
`(iii) THIRD SEGMENT RATE- The term `third segment rate' means, with
respect to any month, the single rate of interest which shall be determined
by the Secretary for such month on the basis of the U.S. Treasury obligation
yield curve for such month, taking into account only that portion of
such yield curve which is based on obligations maturing during periods
beginning after the period described in clause (ii).
`(C) U.S. TREASURY OBLIGATION YIELD CURVE- For purposes of this subsection,
the term `U.S. Treasury obligation yield curve' means, with respect to
any month, a yield curve which shall be prescribed by the Secretary for
such month and which reflects the average, for the 24-month period ending
with the month preceding such month, of monthly yields on interest-bearing
obligations of the United States.
`(c) Definitions- For purposes of this section--
`(1) STATE OR LOCAL GOVERNMENT EMPLOYEE PENSION BENEFIT PLAN- The terms
`State or local government employee pension benefit plan' and `plan' mean
any plan, fund, or program, other than a defined contribution plan (within
the meaning of section 414(i)), which was heretofore or is hereafter established
or maintained, in whole or in part, by a State, a political subdivision
of a State, or any agency or instrumentality of a State or political subdivision
of a State, to the extent that by its express terms or as a result of surrounding
circumstances such plan, fund, or program--
`(A) provides retirement income to employees, or
`(B) results in a deferral of income by employees for periods extending
to the termination of covered employment or beyond, regardless of the
method of calculating the contributions made to the plan, the method of
calculating the benefits under the plan, or the method of distributing
benefits from the plan.
`(2) FUNDING PERCENTAGE- The term `funding percentage' for a plan year means
the ratio (expressed as a percentage) which--
`(A) the value of plan assets as of the end of the plan year bears to
`(B) the current liability of the plan for the plan year.
`(3) CURRENT LIABILITY- The term `current liability' of a plan for a plan
year means the present value of all benefits accrued or earned under the
plan as of the end of the plan year.
`(4) PLAN SPONSOR- The term `plan sponsor' means, in connection with a State
or local government employee pension benefit plan, the State, political
subdivision of a State, or agency or instrumentality of a State or a political
subdivision of a State which establishes or maintains the plan.
`(A) IN GENERAL- The term `participant' means, in connection with a State
or local government employee pension benefit plan, an individual--
`(i) who is an employee or former employee of a State, political subdivision
of a State, or agency or instrumentality of a State or a political subdivision
of a State which is the plan sponsor of such plan, and
`(ii) who is or may become eligible to receive a benefit of any type
from such plan or whose beneficiaries may be eligible to receive any
such benefit.
`(B) BENEFICIARY- The term `beneficiary' means a person designated by
a participant, or by the terms of the plan, who is or may become entitled
to a benefit thereunder.
`(6) PLAN YEAR- The term `plan year' means, in connection with a plan, the
calendar or fiscal year on which the records of the plan are kept.
`(7) STATE- The term `State' includes any State of the United States, the
District of Columbia, the Commonwealth of Puerto Rico, the Virgin Islands,
American Samoa, Guam, and the Commonwealth of the Northern Mariana Islands.
`(8) FAIR MARKET VALUE- The term `fair market value' has the meaning of
such term under section 430(g)(3)(A) (without regard to section 430(g)(3)(B)).
`(d) Model Reporting Statement- The Secretary shall develop model reporting
statements for purposes of subsections (a) and (b). Plan sponsors of State
or local government employee pension plans may elect, in such form and manner
as shall be prescribed by the Secretary, to utilize the applicable model reporting
statement for purposes of complying with requirements of such subsections.
`(e) Transparency of Information Filed- The Secretary shall create and maintain
a public Web site, with searchable capabilities, for purposes of posting the
information received by the Secretary pursuant to subsections (a) and (b).
Any such information received by the Secretary (including any updates to such
information received by the Secretary) shall be posted on the Web site not
later than 60 days after receipt and shall not be treated as return information
for purposes of this title.'.
(1) The table of sections for subpart B of part IV of subchapter B of chapter
1 of such Code is amended by adding at the end the following new item:
`Sec. 149A. Reporting with respect to State or local government employee
pension benefit plans.'.
(2) The table of sections for chapter 43 of such Code is amended by adding
at the end the following new item:
`Sec. 4980J. Failure of State or local government employee pension benefit
plans to meet reporting requirements.'.
SEC. 4. GENERAL PROVISIONS AND RULES OF CONSTRUCTION.
(a) Limitations on Federal Responsibilities Relating to Plan Obligations and
Liabilities- The United States shall not be liable for any obligation related
to any current or future shortfall in any State or local government employee
pension plan. Nothing in this Act (or any amendment made by this Act) or any
other provision of law shall be construed to provide Federal Government funds
to diminish or meet any current or future shortfall in, or obligation of,
any State or local government employee pension plan. The preceding sentence
shall also apply to the Federal Reserve.
(b) No Federal Funding Standards- Nothing in this Act (or any amendment made
by this Act) shall be construed to alter existing funding standards for State
or local government employee pension plans or to require Federal funding standards
for such plans.
(c) Definitions- Terms used in this section which are also used in section
4980J of the Internal Revenue Code of 1986 shall have the same meaning as
when used in such section.
END
